Safaricom upbeat despite drop in profit

November 11, 2011
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Collymore addressing a press conference /FILE

, NAIROBI, Kenya, Nov 11- Safaricom Chief Executive Officer Bob Collymore has said that the listed telecoms firm performed within expectations despite reporting the 47.4 percent slump in net profit for the half year to September 2011. 

Given the operating environment characterised by high inflation, interest rates and a devaluating shilling, the mobile operator foresaw what impact that was going to have on their bottom-line.

“The sense of shock that people had is understandable but we could see how this thing was developing as the half year came through,” explained Collymore of their Sh4billion net profit.

On Wednesday, the operator blamed the tough economic times for the huge slump in their bottom-line, a move that surprised the market and was reflected in a 6.8 percent drop in the counter’s share price to Sh2.75 shillings on Thursday. 

The hard times which have affected households’ disposable incomes are what prompted the hike in the voice tariffs as they sought to cushion their margins.

A Sh1 per minute hike was effected in October 2011 and although it was not expected to affect the first half performance, the telecoms firm revealed that it has seen a positive impact on voice revenues so far.

The CEO maintained that they made the right decision in adjusting the call rates but hopes that they will not have to be forced to do it again going forward.

They are closely monitoring the direction that inflation, interest rates and the shilling will take, all of which will determine the performance of the company in the second half, the CEO added.

“I am cautiously optimistic because it (performance) still does depend so much on all those externalities which we have no control over,” Collymore told Capital Business and exuded confidence that revenues would continue to grow albeit in single digits as will the EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) margins. 

While maintaining that the company’s fundamentals are right, Collymore disclosed that they have put in place strategies that will enable them to sustain their profitability and deliver value to their shareholders.

These measures include a Sh15.5 billion investments in network, fixed data, 3G equipment, fibre connectivity as well as cost management. 

The company’s operational costs rose by 23 percent during the half year but this is an area they are already addressing. The operator is working on slashing by 30 percent and 40 percent, the cost of building their sites and running them respectively.

Going green by having most of their 200 base stations running on alternative energy such as wind, solar and hybrid power solutions are some of the programs that they are expediting.
 
“We are also beginning to move the number of top ups done on scratch cards onto M-Pesa which is cheaper. We have negotiated the cost of lease lines and these are the things that make me optimistic,” he added.

Moving into uncharted territories is another strategy they intend to adopt. This for instance saw Safaricom launch its cloud computing, the first and largest in the region as well the introduction of devices such as the ‘Safaricom Webbox’. 

“We sold out in the first shipment and we are bringing in some more and this is not even 3G,’ he disclosed while crediting not only his staff but their partners, such as Vodafone that enables them to bring in exciting technologies.

These investments are in line with the firm’s positioning as a big data operator in the market, a segment that is already contributing 31 percent of its revenues. 

“We are looking at (data contributing) 45 percent but ultimately voice will become free so we can’t rely on voice to deliver a future for us,” was his prediction over the next two years or so.

These measures are supported by the existence of an ‘improving’ regulatory regime that has reduction of licensing fees, the suspension of the glide path implementation that initially saw termination rates slashed by 50 percent to Sh2.21 per minute.

Collymore, who is one year old at the helm of the telecommunications firm, is aware of the task that is ahead of him as he seeks to make money and ensure a good return for his 750,0000 shareholders.

Despite, the bleep in the profitability path, which many analysts term as a bell-weather for corporate earnings this season, he said he is more than determined to continue offering customers unmatched value for their money and as value-added services that impact their lives. 

“Its hard work but I think it is one of the most exciting jobs in the industry,” he said.

The expectations among investors and the shareholders are huge but he is taking it in his stride, even laughing off accusations that he spends too much time on social networking sites or remarks that Safaricom’s reign as the most profitable company is over.

 

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